I have a list of possible deals, what do I do now?

17 Replies

I went through a small town near where I live and looked at every street and house that was older  (1910-1930) that needs TLC. I have created a list of roughly 45 homes within a 5 square mile radius. This town is an up and coming neighborhood that I believe is going to be one of the biggest appreciation markets in Oregon. (Not speculation) I did my research and asked the county and local builders at their projections of building, roads, markets etc.

My questions is "What is the best way to approach the owners of these homes?"

A lot of the people who own them do not have any payments, they are either paid off or they have a ton of equity. Some are owner-absentee and the home is sitting there rotting. I absolutely love the style of these homes and plan on fixing the home to its original state. 

What are some of your ideas as to not only approach the owners to sell, but also my negotiation standpoint when approaching them?

Thanks for your time!

@Chad Duncan  You either knock on their door or send them a letter indicating you are interested in buying their home.  If they say they are interested in listening then be prepared with lots of questions about the house, their financial/personal situation......  You should also have your research complete on the potential as is value before talking to the owner.

@Chad Duncan To determine the potential value you'll need to find properties that have sold within the last 6 months near the property. If it's in a large city or town then it shouldn't be more than 1 mile. If it's rural then you'll end up going more than one mile. If you have a relationship w/ a realtor they may be able to provide a Comparative Market Analysis (CMA). If you don't have a relationship w/ a realtor (I suggest you get a relationship w/ one) then there are some on line resources, such as Redfin.com, where you can build your own CMA. Redfin's not everywhere though so you may need to use something else. Do a search on Bigger Pockets to see if there are any recommendations for on line resources to generate comparables.

Ok. So find the market comparables. The. Figure out the cost of repairs, then find the true ARV.

What else do I need to do?

find out how would you pay for them if you got a deal,how fast would you close, are you paying cash, how much can you afford plus all the leg work that @Crystal Smith  

 mentioned 

@Chad Duncan  It's too early for you to worry about cost of repairs.  You're initial question was about how to approach the owners.  If an owner responds to your letter or your knock on the door, you should be prepared to provide them w/ some evidence that you can close quickly & you should know how you would close.  If they are interested in what you have to say make an appointment to see the property.  Either go yourself or send someone.  You're objective- Find out the real condition of the property & how much you should adjust your offer based on that condition.   

Originally posted by @Chad Duncan :

I went through a small town near where I live and looked at every street and house that was older  (1910-1930) that needs TLC. I have created a list of roughly 45 homes within a 5 square mile radius. This town is an up and coming neighborhood that I believe is going to be one of the biggest appreciation markets in Oregon. (Not speculation) I did my research and asked the county and local builders at their projections of building, roads, markets etc.

My questions is "What is the best way to approach the owners of these homes?"

A lot of the people who own them do not have any payments, they are either paid off or they have a ton of equity. Some are owner-absentee and the home is sitting there rotting. I absolutely love the style of these homes and plan on fixing the home to its original state. 

What are some of your ideas as to not only approach the owners to sell, but also my negotiation standpoint when approaching them?

Thanks for your time!

 You have just described speculation. You are making a bet, perhaps an educated guess, but just the same, a wager that average home prices in a given community will increase.

People who buy with short term gains in mind are speculators; they often just don't know it. Long term buy-and-hold investors speculate gains, too.they just don't try to realize their gains via sale but rather by increased rents or financing the increased equity.

As to how to approach? Shotgun or rifle? Out of 45 candidates, one of two may be motivated, however your criteria is based in what YOU think, not what the owner wants to do, necessarily. 

Frankly, that's not how I'd build a list, however if that what you're going to use, then start by ranking your 45 properties by owner's equity, length of ownership and age of owner. 

If any owners are deceased, owe back taxes or are in default on a tiny mortgage, they go on your priority list. If all three, they go on the top.

Most newer people blow off door knocking and miss the value of talking to owners in casual conversation. They usually favor an ineffective letter or postcard because they're cheap and too lazy (but no one tells them this; I do!). 

Go back to your hit list, talk to owners and neighbors, too. Don't try to close anyone just yet. If they have an interest, it'll come up naturally when you tell them you want to buy a house in the neighborhood and want to know who is getting ready to sell but hasn't listed with an agent yet.

Anyone who's motivated enough to drive and research 45 properties will find something to buy if they are persistent as well as consistent. 

@Rick H.  Thanks for the advice. I will get on that. As for speculation, it's in favor of growing. My plan is to buy, fix, rent and then possibly sell 10-20 years down the road

@Chad Duncan

What area of PDX are you talking about?

You need to get familiar with Portlandmaps dot com right now. Thats where you will find mailing address info.

Some of the advice you have here is complete garbage. This is a very effective way to build a list in portland. I just drove the Brooklyn neighborhood and wrote down every single SFR and Multi that had any kind of deferred maintenance. Ive got a list of at least 80 properties and will likely get a deal out of that 2 hours of work. Forget about finding out anything about the homeowners, their age, ect ect. Send them all letters, and then follow up with a door knock if the mailing address is local and then get back to work chasing other opportunities. 

You need to start asking yourself, "Is what I am doing right now revenue generating?"

DON'T SPEND ANY TIME FINDING COMPS BEFORE YOU HAVE TALKED TO THE OWNERS AND YOU HAVE A MEETING SET. THIS IS NOT EFFECTIVE OR EFFICIENT.

Why would you buy fix and rent for ten years in the PDX market especially if you are going after historic homes? 

How would you be financing that?

Might want to rethink your strategy and get plugged into a networking group here in PDX

@Chad Duncan  I would suggest door knocking, that way you can get a face-to-face with the owner and they can make an immediate impression, be it good or bad. People are more willing to work with someone with whom they've met and have developed a rapport. One thing to remember, this isn't a sprint, but rather a marathon. Creating that rapport is important and may not come to fruition for months down the road. It is important to understand their situation and determine their motivation for selling their home.

Randy Johnston, Real Estate Agent in OR (#201207851)

@Taylor Shields  Thanks for the advice. I understand that it takes initiative and time. My plan is to knock on doors and if they are not home, I plan on leaving a note in their door that is hand written that tells them about me and my wanting to buy their home.

@Randy Johnston  Hey Randy! Do you know certain ways someone can close fast? I keep hearing people say "Cash Offer", "Close Quickly". I know that with my loan I can technically say cash offer, but how would I close quickly?

@Leigh Ann Smith  Thanks for the links! They are really good!

Originally posted by @Chad Duncan:

 I keep hearing people say "Cash Offer", "Close Quickly". I know that with my loan I can technically say cash offer, but how would I close quickly?

@Leigh Ann Smith  Thanks for the links! They are really good!

 are you using a purchase loan from an investor ?

@Chad Duncan  When they talk about closing quickly, they're talking about the escrow process, such as the title search (ensuring that you receive clear title, so if there are any liens or judgments against the property, it may delay the closing date) another component is the loan process, which is what usually pushes out the timeline in escrow. Coming in with all cash can drastically reduce the time frame for closing. Forgoing any contingencies, specifically a home inspection will also cut down the time frame.

If you are financing your purchase, then it is not a cash offer unless you obtain a loan from a private or hard money lender and they provide you with the cash.

Randy Johnston, Real Estate Agent in OR (#201207851)

Chad,

I've found Yellow Letters work great in this situation. I actually closed my first deal using a yellow letter. Very effective an cheap. Good luck

Regards,

Keith Saunders

When using a "yellow letter", would I just write a note and place it in their door?

Or would I mail the letter hoping the owner will receive it?

Thanks

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